Microsoft To Spend $1.056 Billion On Buying AOL Patents
AOL Inc. will sell over 800 of its patents and their
related patent applications to Microsoft and will grant
Microsoft a non-exclusive license to its retained patent
portfolio for aggregate proceeds of $1.056 billion in
cash.
After the sale is completed, AOL will continue to hold a
significant patent portfolio of over 300 patents and
patent applications spanning core and strategic
technologies, including advertising, search, content
generation/management, social networking, mapping,
multimedia/streaming, and security among others. AOL also
received a license to the patents being sold to
Microsoft.
The patent sale includes the sale of the stock of an AOL subsidiary upon which AOL expects to record a capital loss for tax purposes and as a result, cash taxes in connection with the sale should be immaterial. Additionally, AOL expects to utilize approximately $40 million of its existing deferred tax assets, representing approximately 20 percent of its total deferred tax assets, to offset any ordinary income taxes resulting from the license of its remaining patent portfolio.
AOL said that it intend to return a significant portion of the sale proceeds to shareholders. Pro forma for the sale and license, as of December 31, 2011, AOL would have had approximately $15 per share of cash on hand.
"The agreement with Microsoft represents the culmination of a robust auction process for our patent portfolio," said Tim Armstrong, AOL's Chairman and CEO. "We continue to hold a valuable patent portfolio as highlighted by the license we entered into with Microsoft. The combined sale and licensing arrangement unlocks current dollar value for our shareholders and enables AOL to continue to aggressively execute on our strategy to create long-term shareholder value."
The transaction is expected to be completed by the end of 2012.
The patent sale includes the sale of the stock of an AOL subsidiary upon which AOL expects to record a capital loss for tax purposes and as a result, cash taxes in connection with the sale should be immaterial. Additionally, AOL expects to utilize approximately $40 million of its existing deferred tax assets, representing approximately 20 percent of its total deferred tax assets, to offset any ordinary income taxes resulting from the license of its remaining patent portfolio.
AOL said that it intend to return a significant portion of the sale proceeds to shareholders. Pro forma for the sale and license, as of December 31, 2011, AOL would have had approximately $15 per share of cash on hand.
"The agreement with Microsoft represents the culmination of a robust auction process for our patent portfolio," said Tim Armstrong, AOL's Chairman and CEO. "We continue to hold a valuable patent portfolio as highlighted by the license we entered into with Microsoft. The combined sale and licensing arrangement unlocks current dollar value for our shareholders and enables AOL to continue to aggressively execute on our strategy to create long-term shareholder value."
The transaction is expected to be completed by the end of 2012.